Apple Has Bigger Problems Than iPrefs

Thursday, hedge fund manager David Einhorn gave his detailed presentation on why Apple (AAPL) needs to issue preferred stock -- what he calls an iPref.

His argument boils down to his belief that doing so would attract a whole new type of value investor class to own the stock, which would cause a move up in the shares, compared to continuing along with stockpiling cash.

To be honest, after spending this week in Silicon Valley, I'm more convinced than ever that Apple has much bigger fish to fry than worrying about whether it's going to issue preferred stock or double its dividend as some have said it will.

I love Apple. I own it and I plan to own it. I'm also a big fan of CEO Tim Cook. But there are issues that I'm worried about relating to Apple that I think are critical for the company to start addressing and I'm not sure if they see it as such a high priority as it deserves.

Social. Apple has no understanding of how social works. Its one foray into the space was Ping and it never went anywhere. ITunes remains very anti-social. They need to address this in a big way moving forward. Twitter would be the most natural way to expand here through an acquisition. But the two cultures of Apple and Twitter are very different and wouldn't necessarily mesh well.

Internet Services. These are sometimes called Web Services. Think MobileMe. Apple has not naturally done these kinds of services well. And yet Google (GOOG) keeps cranking them out with Maps, Gmail, Earth, Plus and others. It's critical that Apple start to churn out equally strong Internet services of its own. It made a start with its Apple Maps but it need to keep going and it just has not shown it is very good at doing these things quickly and well. Yahoo! (YHOO) would be a nice fit in these areas and Marissa Mayer would be the perfect person to head up Internet Services at Apple.

Cloud Services. People think that, since Apple now has iCloud, it's figured out cloud services. That's not the case. Google -- and even Facebook (FB) -- rely on constant upkeep of services and is much better at the cloud than Apple. When iCloud first launched, Apple had to rely on Amazon's (AMZN) web services business and Microsoft's (MSFT) cloud services. It's not possible to keep iCloud growing as quickly as it will need to without bringing in more talent. Dropbox would be the best acquisition in the space, but there are other smart folks out there.

"Not Invented Here" Syndrome. The key question is does Apple know what it doesn't know. Does it realize it needs help in these key areas? I don't know and I don't think most folks in Silicon Valley know either. Apple has a very deliberate approach and usually a bias to building something themselves rather than rely on others for help.

Inability to acquire and keep talent. Apple hasn't done a lot of deals to start with; however, more concerning is Apple hasn't kept the talent when they've done -- for them -- big deals (think Quattro Wireless and Siri).

Apple needs its cash hoard to do some big transformative acquisitions. But it's not clear that it realizes it needs the help. It's also not clear Apple would be able to keep the talent at these acquired companies if they did a big splash deal (or deals as I'm advocating). These are the big issues Apple must address this year -- not whether or not it issues preferred stock.

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